A final all-out battle for Basra is seen as 'inevitable' as persistent violence looks set to keep British troops mired in southern Iraq longer than was expected.

An uneasy truce has been maintained between Iraqi security forces and Shia militia groups since Britain handed over control last December and moved to a base outside the city. Gordon Brown announced that the number of troops in Iraq would be cut from 4,700 to 2,500 by spring but that timetable appears increasingly optimistic.

Last week four British soldiers were injured, one seriously, by a roadside bomb during a night patrol and three contractors, two Indian and one Sri Lankan, died on the British base after it was hit by 19 rockets in 24 hours. Two private security company staff were injured after a visit to the Basra Children's Hospital. Negotiations for the release of a kidnapped British photojournalist continued without a breakthrough.

In an unusually frank analysis, Colonel Richard Iron, military mentor to the Iraqi commander General Mohan al-Furayji, said 'There's an uneasy peace between the Iraqi Security Forces [ISF] on the one hand and the militias on the other. There is a sense in the ISF that confrontation is inevitable. They are training and preparing for the battle ahead. General Mohan says that the US won the battle for Baghdad, the US is going win the battle for Mosul, but Iraqis will have to win the battle for Basra.'

Basra has been the scene of a violent power struggle between rival Shia factions, prominently Jaish al-Mahdi (JAM) led by the radical cleric Moqtada al-Sadr, who last week announced an extension to its six-month ceasefire. It has seen armed groups move into hospitals and university campuses to impose their religious and political ideology, bullying or even beheading women for going out to work or dressing inappropriately.

Asked who runs the city now, Iron, who has been in Basra since December, said: 'There's no one in charge. The unwritten rules of the game are there are areas where the army can and can't go and areas where JAM can and can't take weapons.'

He added that General Mohan was keen to maintain the British presence. 'Mohan's view is that having this force here - the tanks, helicopters, aircraft and so on - gives him power downtown. If there were no coalition forces here, his political power would be hugely damaged. If he is going to fight or face down JAM, he needs this back-up.'

Despite public expectations of a rapid wind-down and withdrawal, British battle groups continue to conduct joint operations with the ISF at the border, where the smuggling of Iranian weapons to Shia militias remains a major concern. In a combined anti-smuggling effort at the port of Umm Qasr earlier this month, British soldiers fired a £67,000 missile to sink a barge armed with machine guns and rocket-propelled grenades. But their primary role is now training and mentoring Iraqi troops and police.

Far from the 35sq km British garrison at Basra airbase now being dismantled, a £12m military hospital and five rocket-proof dining facilities are under construction. A £4m barrier dubbed the 'Great Wall of Basra', made of 13ft high concrete blocks each weighing 6 tonnes, will soon stretch 7.5km around the base. The siege mentality is underlined by accommodation where beds are shoehorned between sandbags and 7.5-inch thick concrete blocks. Body armour and helmets are worn or within reach at all times.

Speaking to The Observer in his first interview since taking charge two weeks ago, the new British commander, General Barney White-Spunner, refused to set a deadline for reducing the 4,000 troop contingent. 'For the time being, the ISF value the assistance and training that we give,' he said. 'When they say thank you very much, that'll be the time to go.

'We are emerging from some dark days. There are criminal elements, there are splinter groups, there are people that don't want to get on with the process. But given the rather tortuous path this poor country's been on in the last 15 years, I think the progress it's made is really encouraging.

'It's like we've been pushing a rock up a hill, we're just on the top of the hill and once the economy takes off, when people have got jobs, health and education, that's when things will really start going.'